New CCPA report finds tax cuts no miracle cure for BC

June 26, 2000

(Vancouver) The BC Office of the Canadian Centre for Policy Alternatives released a major new study today on taxes in BC. The report, by economist Marc Lee, takes a close look at BC's tax levels (including comparisons with other jurisdictions) and examines the arguments and proposals that have been made in favour of tax cuts.

"We decided to undertake this project because we were worried about the amount of incorrect and misleading information in the public debate about taxes in this province," said Lee. "Our research shows that, unfortunately, there is more snake oil than science when it comes to many of the arguments made in favour of tax cuts."

The report, called Tall Tales about Taxes in BC debunks many common myths. Contrary to what British Columbians frequently hear, taxes in BC are among the lowest in Canada. A two income family of four with an average income of $55,000, for example, pays less in total taxes than in any province except Alberta.

International comparisons show that taxes here are not out of line with other industrialized countries, including the United States. Only at very high incomes is there a meaningful tax advantage in favour of the US. "Most British Columbians would not be better off by moving South," said Lee. "And when factors like lifestyle and social programs are taken into consideration, the BC advantage is even greater."

The report also examines arguments that tax cuts will cure BC's economic ills and finds them to be vastly overstated. In particular, the assertion that tax cuts will not decrease government revenues does not hold up to careful scrutiny. "Despite the sales pitch, tax cuts are not a free lunch," said Lee. "Claims that you can have it all--tax cuts and improved public services--have more to do with political tactics than good economics. British Columbians should be very skeptical of this warmed-over version of 1980s Reaganomics."

The report finds that proposals for tax cuts would give the greatest gains to those who need financial relief least. While "tax rage" is being sold to the general public, it is declining market incomes--not tax increases--that have contributed most to shrinking disposable incomes for most British Columbians.

"The campaign for tax cuts is really about big tax cuts for a very small group of high income people," said Lee. "The meagre savings a typical taxpayer would receive will not compensate for the inevitable loss of public services, like health care and education, that will accompany upper income tax cuts."